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Measuring mobility

July 10, 2019 Articles, Letters

A letter to the Princeton Alumni Weekly (PAW).

July 10, 2019 (Volume 119, Number 15)

The article on economic mobility (Life of the Mind, May 15) seems to confuse economic mobility with economic growth. Most economists measure economic mobility as intergenerational movement along the income-distribution ladder (rather than by absolute incomes). That is, to what extent do offspring track their parents’ position on the income distribution ladder at similar age profiles. The fact that 90 percent of children born in 1940 ended up earning more money than their parents was a result of a post-war economic boom whose gains were broad across the population. That only 50 percent of those born in the 1980s earn more than their parents is largely because median income has stagnated since about 1980 in spite of growth in average income, due to increasing income inequality; i.e. growth has been mostly captured by the elite. Yes, economic mobility is lower now than before, but this is expressed through what economists call the income beta: how well an offspring’s position in income distribution is predicted by their parents’ standing. A higher beta (lower mobility) — what we see now relative to the past — means (broadly speaking) that those born poor stay poor, and those born rich stay rich.

Kai L. Chan *08
Montreal, Quebec, Canada

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